The Feasibility of Opening the Sparkle Jewelry Retail Store in Hong Kong

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The Feasibility of Sparkle Ltd’s
Opening Jewellery Retail Store in Hong Kong

PROBLEM

This study was designed to analyze and evaluate the feasibility and possibility of Sparkle Ltd’s idea to open a jewellery retail store in Hong Kong. Specifically, the study seeks answers to these questions:

* What is the opportunity for opening a jewellery retail store in Hong Kong? * What is the risk of opening a jewellery retail store in Hong Kong? * Do the advantages overweigh the disadvantages in this initiative?

BACKGROUND

CEO, Mr. Lee, authorized this study to examine the market and tell whether it is good time to open a retail store as the overall economy of Hong Kong is still strong. To achieve the goal, this study must identify and compare both the potential risk and opportunity of the investment.

Data for this report came from website of Hong Kong Jewellery Manufacturers’ Association and some secondary data on Hong Kong trade and development Council

DISCUSSION OF FINDINGS

Opportunity

1. Change in constitution of global demand for jewellery. As a kind of luxury good, demand and price for jewellery are very sensitive and would fluctuate as economic condition changes. Since the financial crisis in the end of 2008, United States and Euro Zone have been trapped in serious recession; as a result, their demand for jewellery dropped dramatically, while originally the two economies consumed an unchallengeable majority of global jewellery. On the other hand, demand from developing countries like China, India, Malaysia, Thailand, etc. increases quickly, having strong potential to replace the dominative status of US and EU.

Figure 1
Area or Country| Growth rate of export value of Hong Kong Jewellery in2010| China| 18.2%|
Russia| 96%|
Macao| 160%|
America| 19.9% (recover gradually to former level while its proportion dropped from 35% to 31%)| Southeast Asia| 25.4%|
Europe| 7.8%|
Source: Hong Kong Jewellery Manufacturer Association (HKJMA) http://www.jewelry.org.hk/jma/html/tc/overview.jsp

Figure 1 shows the growth rate of export value of Hong Kong Jewellery in2010 and also reflects the change in global demand and consumption of jewellery. It proofs that although demand from Europe and America gradually recovers after financial crisis, emerging market like China, Southeast Asia and Russia tends to soon constitute an ever higher proportion of total consumption.

Figure 2

Source: Hong Kong in figures 2012 edition, Government of Hong Kong Special Administrative Region.

Figure 2 reflects the financial crisis in the end of 2008; during its most tough time, Hong Kong Jewellery’s export dropped by 30% of the value before the crisis because the major demand from America and European Union plunged. Nevertheless, it finally overcame the challenge and backed to its original level in 2010; in 2011, it even reaches its new highest record. According to Hong Kong Jewellery Manufacturer Association (HKJMA), it is because the whole industry turns its focus to niche of emerging markets and enjoys the high growth rate of those economies.

Projection - As overall Asia improves its economic situation and the global demand constitution of jewellery changes, Hong Kong enjoys the wealth brought from the tourists of its neighbors like Mainland China. It provides a strong demand and opportunity for Sparkle Ltd to adapt itself to the global tendency by turning its focus from Europe and United States to Asia timely before too late.

2. Growing Market With No Entry Bar
Hong Kong jewellery market is still growing rapidly; the overall turnover increases year by year with an amazingly high growth rate. Under such favorable condition, there are so many well-performing companies of different scale and position. Chow Tai Fook, Chow Sang Sang and Luk Fook are the most famous and largest local jewellery retailors in the market, while foreign brands like Tiffany and also many other small...
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